“The Tea Party protesters are being manipulated by the very same conglomerates that are causing their problems . . .” Jimmy Hoffa, Jr.

This quote from a Detroit News op-ed is just one more in a long train of smears against the Tea Party movement by political leftists in government, media and academia; and by beneficiaries of the big-spending government status quo such as union bosses like Hoffa. Other recent examples include Thomas Frank in the Wall Street Journal this week, and the MSNBC host who melted down while interviewing a guest identified with the movement, accusing it of harboring “people who want to kill blacks and Jews.”

They even do it unconsciously, as when Public Broadcasting person Gwen Ifill used the pejorative “teabagger” to refer to opponents of President Obama, not knowing of the term’s sexual origin, the source of it being coined as a Tea Party insult. Ifill’s ignorance – and she’s not the only one in media who has displayed this example – reveals that her only information about the movement (if not the world in general) comes from sources on the left.

This reflexive smearing of the Tea Party movement is interesting. Left-brained people just can’t imagine how those who believe in limited government and economic liberty could possibly be sincere and motivated by good will. One result is that when they look at free-market friendly non-profit organizations like the Mackinac Center they presume that these are cynical agents fronting for the class interests of a corporate plutocracy.

As for grassroots Tea Party protestors, the smear-jobbers imagine that these people must be motivated by something dark including racism and other forms of bigotry. At best they are ignorant dupes, manipulated by cynical elites and tricked by “false consciousness” into opposing their own best interests.

One of my colleagues believes that the insults are part of a willful delusion. The long range implications of the alternative to the “corporate puppets” theory is just too awful for them to contemplate. Specifically, that the Tea Parties are indeed a genuine bottom-up, grassroots movement that represents the vanguard of a sea change in the climate of public opinion regarding the big government welfare/regulatory state.

This frightening prospect causes liberal statists and government spending beneficiaries to become not just discombobulated when discussing Tea Parties and partiers, but unhinged, a’ la’ Thomas Frank and that MSNBC person.

Note: This article was posted in 2008 on a previous version of the “Students for a Free Economy” blog that is no longer live. The legislation it describes is moribund for now, but “rent-seeking” entitites never stop seeking political favors, so it could return at any time.

Legislation has passed the Michigan House that is certain to reduce competition and choice in the growing individual health insurance market in Michigan, reducing innovation and raising prices. 2007 House Bills 5282-5285 would let BCBS have it’s cake and eat it too with regard to retaining its tax-exempt status, but no longer having to carry the load as the state’s insurer of last resort. Instead, that burden would be off-loaded to for-profit insurers in the form of fees or assessments over which they would have essentially no control. In return Blue Cross would give up – well, it wouldn’t give up anything at all!

Here’s the context: In general, there are two ways for a state to make private insurance available to people who are uninsurable due to pre-existing conditions. Many states have high-risk pools, which is what the current legislation would create. Under that system all insurers pay a fee or assessment that is used to subsidize price-controlled policies for those denied coverage elsewhere. The other method is to establish a non-profit, tax exempt entity as the insurer of last resort, which is what Michigan has in the form of Blue Cross. It’s an either/or policy, but this legislation would establish both, with Blue Cross in the catbird seat.

The legislation would also impose price controls in the form of “rate bands” on individual health insurance policies, would repeal some BCBS oversight provisions from current law, and would allow the for-profit insurance companies Blue Cross has acquired to enter the health insurance market – something now prohibited. It whooshed through the House in near record fashion, with just 13 days passing between introduction and an 89-17 final passage vote.

Lansing insiders joke that given its outsized political influence, legislators might as well light up the Capitol dome with the BCBS logo at night. The nonprofit insurer’s PAC has contributed to literally every single state representative and senator now serving in the Michigan Legislature. In the last election cycle it was the 13th largest campaign giver; in the 2003-2004 cycle in which the pro-BCBS group health insurance regulations passed it was the 7th largest, contributing $920,421 to candidates.

Blue Cross controls as much as 70 percent of the Michigan health insurance market (it says the number is closer to 60 percent). Reportedly no other state “Blue” dominates its state’s insurance market to the extent that Blue Cross Blue Shield of Michigan does the Great Lake state’s.

Incidentally the BCBSM board contains a who’s who of Michigan union bosses. Its dominance in the state health insurance market – directly related to its dominance in the political arena – is perhaps another negative effect of what I have called “the curse of GM”: The hangover of state economy that heavily reliant on a single industry (car-making), and that industry’s too-cozy past relations with its unions.

Government employee “furloughs” are obnoxious, but not because these individuals get a day off and don’t get paid for not working. They’re obnoxious because they demonstrate the stranglehold that unions have on the state and local governments, because the state has allowed its own workers to engage in collective bargaining, and mandated it for local governments.

This and other rigged rules result in so much inflexibility that governments are unable to adjust compensation to reflect fiscal reality.

The one thing they can do – and even on this the state thinks it must run to the union bosses for permission – is furloughs.

Here’s a better idea: Change the law and tell government employees who are already covered by civil service tenure protections this:

“Sorry, we’re not gonna bargain with you. Here’s the salary we’ll pay, here’s the bennies, take it or leave it, if you don’t want it there are plenty behind you who will.”

A lot of states do just that. The states that don’t are the ones that are imploding fiscally, economically, demographically.

I just quantified my 401k stock portfolio for the first time since the spring of 2007. (My rule: Open statements when markets rising and toss them when falling.)

Bottom line: Damage done, but not tragedy.

The question: Is this April 1930, or July 1932? After falling around a third in the 1929 crash, stocks recovered almost half the loss over the next six months; then they fell again, hitting values in July 1933 barely 10 percent the 1929 high.

Why shouldn’t now be more like April 1930? Look at the landscape:

Looting, power-mad politicians are in control and are strangling the economy’s “animal spirits,” which suggests deflation. The value of our currency is being wrecked, which suggests inflation. Judy Shelton (below) says we already have the latter, with the funny-money going into stocks, bonds, gold, even real estate (none of those should be rising given unemployment, low capacity utilization, savaged balance sheets and more).

It looks to me like big wheeler-dealers are borrowing nearly-free money and putting it into stocks and other financials – the “carry trade.” Are there big earnings ahead for the companies they’re buying, notwithstanding the policy poison the pols are mainstreaming into the economy’s lifeblood? I don’t see it.

Instead, this looks like a trap – when rates start to climb the smart boys will exit and the market will crash. Unlike 1987, when the market popped right back, today there’s no virtuous policy mix and no big productivity gains percolating.

So what pops the bubble? All the funny money creation tastes great and seems less filling at the moment. And I do believe in Tinkerbelle, I do believe in Tinkerbelle – not. See Douglas Holtz-Eakin (below).

Stocks: We’ve had a big run-up from the low, despite public policy poison and dubious future earnings prospects.

Cash (in dollars): It’s being eroded by dollar decline.

Jeez, what’s left – Swiss Francs? (The Swiss have gone wobbly on some things too, but still . . .)

Maybe a few eggs in energy stocks – the havoc the pols are wreaking there may enrich select real energy providers who can still function (oil services, perhaps).

~~~~~~~~

from The Fed’s Woody Allen Policy: Efforts to stoke a recovery may be creating new asset bubbles in equities and elsewhere, By Judy Shelton, WSJ, 11/11/09:

In the Woody Allen film “Annie Hall,” the main character tries to explain irrational relationships by recounting an old joke. “This guy goes to a psychiatrist and says, ‘My brother’s crazy, he thinks he’s a chicken.’ The doctor says, ‘Well, why don’t you turn him in?’ And the guy says, ‘I would, but I need the eggs.'”

It takes similar reasoning to reconcile the elation felt across America every time the stock market rises—partially replenishing personal investment portfolios and 401(k) retirement plans—with the uneasy feeling that we are being set up for yet another big financial disappointment. We dare to hope that the economy is growing solidly once more, that the Federal Reserve has superior knowledge about providing liquidity, and that the U.S. Treasury knows what it’s doing by guaranteeing money market-fund assets.

But what if the Fed’s efforts to stoke a recovery are merely creating asset bubbles in equities and elsewhere? What if government guarantees—explicit and implicit—are encouraging high-risk investment behavior rather than restoring conditions for normal market returns? What if excess dollars produced here are being channeled by speculators into foreign stock and bond markets as part of a currency play?

. . . But wait a minute. If unemployment is high, doesn’t that indicate a surplus of labor relative to the demand for labor? Wouldn’t that cause the price of labor to come down? If you throw in the fact that industrial capacity utilization, at 70%, is lower now than during any prior recession since the Fed began tracking it in 1967, and that the housing vacancy rate is nearly 11%, you begin to wonder why the price level should nevertheless continue to rise, even by a little bit, every month.

. . . But the Fed seems to think that prices should only go in one direction—up—no matter the circumstances. It’s this bias toward inflation that is revealed by the FOMC’s reference to “stable inflation expectations”—which is less a paean to price stability than an inadvertent oxymoron.

The Fed’s asymmetrical thinking extends as well to its treatment of financial assets—such as equity and debt instruments—en route to a bubble. As prices surge and markets soar, the Fed is reluctant to raise interest rates lest it be accused of hindering growth. But when the bubble bursts and asset prices begin to tumble, the Fed quickly steps in with dramatic interest rate reductions to “restore investor confidence” in hopes of avoiding a meltdown.

The answer would seem to lie in whether the Fed’s money machine is fueling an illusory recovery that is only manifested in financial markets as opposed to the general economy.

. . . Sure, we could be facing the latest Fed-induced bubble—but so what? We need the eggs.

“At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president’s recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.”

Ben Stein, 1/20/2009:

. . . we have been fooled so much in the past 15 months about what real earnings are, what real book value is, that we cannot trust the data given to us. Yes, by current price-earnings measures, stocks look fairly reasonable. But we don’t really know what true earnings are. That is the vicious truth. So if we are in the quicksand of not being able to rely on the data our companies give out, then anything can happen. Yes, we may be at a bottom or near it. Or we may not be anywhere near a bottom.

. . . Still, I have learned a bit of a lesson. I was wrong to have as little as I did in cash and Treasuries. I was wrong to be as sanguine as I was about my stocks and real estate in terms of their volatility. It was, in fact, possible for almost everything to collapse at once — and it did. “The market trades to cause maximum pain” is a fine adage for investors then, now, and in the future.

Toward the end of his life, Ben Graham, Warren Buffett’s brilliant teacher on value investing, told his friends that he had decided the stock market was simply too dangerous for him; he would keep all of his money in Treasuries. He was much smarter than I am; I am still foolish enough to think I should have a good chunk in stocks, especially at the current marked-down prices. Mr. Graham, by the way, died in the mid 1970s — a terrible time to own either bonds or stocks.

But, although I will keep money in stocks, I will keep more than I did in insured cash and Treasuries. I will follow the advice of author and speaker Raymond J. Lucia to keep many years worth of spending needs in cash or near cash. I will, in a word, hedge myself more in US government bonds and cash than I previously did. I shake when I think of this because I feel sure inflation will eventually come back in a big way. But I am hedged on that — I hope — by my real estate, which I did not — cannot — sell.

A person named Lynndee Kemmet opined in the Detroit News that Detroit should avoid bankruptcy because:

When municipalities receive bankruptcy protection, or go into receivership, unionized employees are not the only ones who stand to lose. A city in bankruptcy becomes a far less attractive place to live and work. Residents with the resources to move elsewhere often do, leaving behind those least able to pay the taxes needed to get the city out of its mess.

Bankrupt cities have taken decades to recover. A bankrupt city is not only less attractive to residents and good employees, but it’s also far less attractive to businesses that might help spur future economic growth.

And then there are future investors. A bankrupt city is unlikely to find buyers for future bonds for roads, sewer and water projects, city buildings and parks.

Hey babe – relax: Those trains all left the Michigan Central station many moons ago.

In her latest column for Forbes, Reason Foundation senior analyst Shikha Dalmia includes a poignant, touching rendition of her immigrant’s-eye perceptions when she first arrived in Detroit 21 years ago, not long departed from her native New Delhi:

What was surprising was that there was no sign that the looters (of Detroit’s abandoned homes) were doing anything constructive with their ill-gotten gains. In India, the entire project of life can be conducted out of ramshackle structures erected on dirty sidewalks from scraps of discarded tarp, pilfered corrugated metal, bamboo poles and a few logs for fuel scavenged daily from trash heaps. In these filthy, exposed dwellings, families are raised, goods produced and sold (tandoori roti, dal, sabzi), services provided (ironing, shoe repair), and even animals given shelter. They are not ennobling or uplifting. But they are testimony to the powerful human need to survive and flourish, even in the direst circumstances.

It didn’t seem plausible that this basic urge had somehow ceased to exist in Detroit. Hence, when Mayor Dennis Archer started talking in the mid-’90s about reviving the city by erecting new stadiums and casinos, his message resonated with Detroiters, including me . . .

Dalmia goes on the recap how these “flashy projects” from Archer and his successor failed to revive the city, and to express amazement at the latest credulous hype, this time fueled by misplaced faith that a handful of artsy-craftsy Bohemian-types buying some cheap houses will act as “first-stage gentrifiers, paving the way for the return of doctors and lawyers and other bourgeois professionals.” This notwithstanding out-of-control crime, a completely dysfunctional city government, and a fiscal black hole that threatens to further diminish an already meager and alienated remainder of a city that once claimed 2 million thriving souls.

The Mackinac Center’s Michael LaFaive has documented in more detail the rise and fall of some of those “Flashy Projects” Dalmia refers to.

Probably not, there have been some real doozies over the centuries, but he certainly is one of the boldest in the current era. Last year he made news with a cockamamie scheme to use government subsidies to build a zillion windmills out in the prairies, with the absurdly expensive power backed up by – wait for it – generators fueled by the natural gas in which he has substantial investments.

This week he’s proposing a slightly less byzantine but equally goofy scheme in the Wall Street Journal: “Adopting a ‘cash-for-clunkers’ program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants.”

Yep, gas power plants powered by the fuel in which – wait for it – he himself has substantial investments.

Back during the Cold War I was often struck by how many times the Evil Empire would accuse the U.S. and the West of doing things that were in fact SOP for the communists themselves, such as rigging elections, quashing dissent, manipulating statistics, etc. Actually these things are characteristic of government itself, but in the open societies of the west attempts to perptetrate them rarely escape public exposure and retribution, while in police states they are business as usual.

So now we have the spectacle of the President, Democrats, the left and their tools in the mainstream media accusing the right of whomping up bought-and-paid-for opposition to a government run health care system. Here’s “hack columnist” Bill Press (Reason Hit & Run’s characterization) on the current opposition to ObamaCare:

Taking a page right out of a Nazi playbook, organizers bus in professional protestors and arm them with instructions on how to take over meetings, shut down discussion, shout over any pro-health care reform speakers, and then post video of the resulting chaos on YouTube. It’s mob rule, pure and simple. Taking a page right out of a Nazi playbook, organizers bus in professional protestors and arm them with instructions on how to take over meetings, shut down discussion, shout over any pro-health care reform speakers, and then post video of the resulting chaos on YouTube. It’s mob rule, pure and simple.

Gosh, all that sounds so much like every right-of-center speaker on a college campus in the past 25 years getting shouted down for daring to voice dissent on minority preferences, global warming, socialism, etc. How many times have we seen “bussed in” protestors on the Capitol lawn in Lansing when the issue was pay or benefit cuts for government workers, accepting a $200 million charter school grant for Detroit, placing a anti-minority preferences ballot initiative that had received 500,000 petition signatures on the ballot, reducing state higher education appropriations, and many more?

Just as the governments in the open societies of the west could (rarely) get away with secretly using police state political tactics in the either the Cold War or present era, so the right is completely incapable of mounting “astroturf” and “hire-a-mob” tactics in this health care debate without the story quickly being exposed on page one of the Washington Post and NYT. People intuitively know that claims to the contrary are laughable, which might explain why the President and his allies are getting a black eye for suggesting it.

Burkeian conservatism is an honorable tradition and a coherent political theory. However, “conservative” as used in the current political context denotes nothing but an idiosyncratic bundle of disconnected prejudices, the specifics of which vary with each person claiming the label. As such the word has become meaningless, and much besmirched. The label has been claimed by everyone from Arlen Specter to David Duke and Richard Nixon, and in its current sense they all have a legitimate claim to it.

Hayek and Milton Friedman knew what they were about when they declined the label.

~~~~~

So the Admiral Stockdale question: “Who am I, why am I here?”

“Libertarian” is a meaningful term but it has its on problematic connotations (“hangs with kooks”), although these seem to be diminishing. It’s also very broad, encompassing everyone from anarcho-capitalists to people who claim the same awkward label that I do, “supports limited government.”

Someone recently challenged the usefulness of that, saying “everyone supports limited government.” They did not understand the term. “Limited government” is a noun, not a noun-with-adjective; it denotes a system like the one created by our founders, with government’s role restricted to explicitly delineated powers and duties – and no more.

~~~~~

BTW, one reason “conservative” may be so vulnerable to abuse is that it is “relativistic” – it only has meaning in reference to something else. Notwithstanding the shortomings of “libertarian,” it actually does mean something all by itself, independent of any other political theory.

As expected, my first Experimental Aviation Association annual Oshkosh fly-in was overwhelming, an airplane-buff’s utopia. Way too much to describe in detail, but here’s a couple high points.

One of the main features of this year’s show was the arrival of one of only two flying examples of the WWII Avro Lancaster heavy bomber, which flew night missions over Germany for the RAF from 1942-45. I described to friend Kate and 9-year-old nephew Lucas how grim and terrifying those missions were – in the dark and cold at 20,000 feet, knowing that at any moment a German nightfighter or flak could turn your roaring heavy truck of a bomber into a flaming coffin with no warning whatsoever.

Lancaster at EAA, 2006

When I was not much older than Lucas I read one amazing story about a Lanc’ tailgunner’s near-death experience. The rear turret was so cramped that the gunner could not wear a parachute. He crawled in though a small hatch at the rear of the fuselage, the door of which had to be closed for the turret to rotate. If the plane was hit the idea was that he would climb back through the hatch, put on the ‘chute, and jump.

Yeah, right. Kate, Lucas and I were able to peer into the rear turret and confirm that, yep, you could not sit in there with a parachute on.

Anyway, the story I read decades ago told of a gunner whose plane was hit and was going down in flames. He reached for his chute, but it was a smoldering ruin from the fire. The airman, 21-year-old Nicholas Alkemade, faced a grim choice – burn to death or jump without a chute. He jumped. Amazingly, he lived, falling through pine boughs and landing in a snow drift.

After my long talk with the Spitfire pilot (below), while sitting below the wing of that gorgeous fighter with Lucas putting on sunscreen, I was repeating the story to a young gal who was there with the Spit’s owner, Vintage Wings of Canada. We were politely interrupted by an elderly gentleman:

“Excuse me, I hope you don’t mind the interruption, but I was in Stalag Luft III with the man who jumped from that plane.”

Well, you could have knocked me over with a feather! Not just at the coincidence, not just the living history, but because I was instantly aware that we were in the presence a hero. Why? My friends, there was only one way to become a “guest” of this infamous German Luftwaffe POW camp for allied aircrew (the camp at which The Great Escape occurred), and that was to survive getting shot down over occupied Europe.

The new participant was Bill Whitney, a B-26 Marauder pilot who was shot down in flames over Dunkirk in May, 1944. (Read about it on his “My ‘Shot Down’ Story” webpage, here.)

Bill Whitney in 1944 (He looks the same in 2009 except older).

If there was one mission worse than flying Lancasters in the cold and dark over Hitler’s Germany, it was flying medium bombers like the B-26 on “straight and level” bombing runs over some of the most heavily defended targets of the war. Unlike the “heavies” – B-17s, B-24s, Lancasters – which flew at 24,000 feet or higher, “mediums” like the B-26 flew at much lower altitudes. Mr. Whitney’s formation was at just 14,000 feet when his plane was hit by flack. Up above 20,000 feet only the big ’88s could reach the heavies, but everything above 20mms could reach out and touch aircraft flying below 15,000 feet – and did.

I salute you for your service, Mr. Whitney, and am proud to have met you. Like many of his generation he is modest and matter-of-fact about what he did – it’s just what you did in that time and place. Yes, just as leaping without a chute from a burning Lancaster is just what you did in that circumstance, also. Incredible men, incredible times.

Mr. Whitney added this little tidbit to the Nicholas Alkemade story: The orderly Germans were so blown away that he had survived the leap that they gave him a certificate stating that he had bailed out without a parachute and lived.

Bill Whitney is 87, and said this will probably be his last Oshkosh. I now realize why I should have attended long ago – these guys are going fast now – but my sister chided me for saying so, correctly observing that I should be glad for the experience I did get to enjoy. I’m also glad that 9-year-old Lucas now has his own piece of first-person WWII history to pass on for another 80 years or so.

BTW, here’s the story of the no-parachuted survival as related in wiki:

On March 24, 1944, 21 year old Flight Sergeant Nicholas Stephen Alkemade (1923 – 1987) was a member of No. 115 Squadron RAF. His Lancaster II “S for Sugar” was flying to the east of Schmallenberg, Germany on its return from a 300 bomber raid on Berlin, when it was attacked by a Luftwaffe Junkers Ju 88 night-fighter, caught fire and began to spiral out of control. Because his parachute was destroyed by the fire, Alkemade opted to jump from the aircraft without one, preferring his death to be quick, rather than being burnt to death. He fell 18,000 feet (5500 m) to the ground below. His fall was broken by pine trees and a soft snow cover on the ground. He was able to move his arms and legs and suffered only a sprained leg.

~~~~~~~~

That’s the people story of my Oshkosh, here’s the hardware one (also with some people parts). I spent a couple joyful hours worshipping at a temple of the most beautiful airplane in the history of manned flight, the Supermarine Spitfire. And not just any Spit, but perhaps the most beautiful of all Spits – a Mark 16 with teardrop canopy and full elliptical wings. The Mark 16 was a Mark 9 with Packard Merlin, and they all came off the line with cropped wings. This one had the full ellipticals because it was the personal aircraft of Sir James Robb, RAF Air Chief Marshall, who had places to go and people to see, so they put the easily-added wingtips on his plane (giving slightly better high altitude performance at the expense of low-level speed).

Vintage Wings of Canada Spitfire Mk. 16

Much thanks to pilot John Aitken, an ex-RCAF Voodoo and F-104 jock*, who was most generous with his time offering detailed information about the aircraft and his own fascinating career. (Poor guy – his last air force duty was evaluating the various types under consideration when Canada adopted the F-18. John was forced to fly the F-16, Mirage F1, and possibly one other. And then, years after retiring, for his sins they gave him a Spit to fly!)

I also spent some time swapping history stories with another Spitfire worshipper as we paid homage together to this magnificent aircraft. We both agreed that but for the Spit, the Brits almost certainly would have lost the Battle of Britain, cut a deal with Hitler and dropped out of the war (this was Hitler’s actual goal in the summer of 1940 – he didn’t really want to invade Britain).

If that had happened Germany would have had a free hand when it invaded Russia in the spring of 1941, and given how close the Wehrmacht’s panzers came to victory that fall, probably would have won the war. (Among other things Barbarossa would not have been delayed by a campaign in Greece to pull Mussolini’s rear end out of the fire – a delay that proved fatal when the Russian winter closed in early six months later.) It’s entirely plausible that from the Atlantic to the Urals, Europe today would still be part of the Greater Third Reich, and under the rule of Hitler’s successors.

“But for a nail the shoe was lost; but for a shoe the horse was lost; but for a horse the soldier was lost; but for a soldier the war was lost.”

But for the Spitfire, and its designer Reginald Mitchell . . .

*Interesting sidelight: The F-104 Starfighter was kind of a Cold War version of the Spitfire – an ultra-high performance, short range, point-defence interceptor. Both aircraft had broader roles, but that’s that they were really born and bred for.